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Seagate (STX) Q4 Earnings: Disappointment in the Cards?

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Seagate Technology Plc (STX - Free Report) is scheduled to release fourth-quarter fiscal 2017 results on Jul 25.

The company is unlikely to post a positive earnings surprise due to an unfavorable combination of Zacks Rank #4 (Sell) and Earnings ESP of -2.02%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

This is because, per our proven model, a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 to beat estimates.

We also don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Increasing Competition Hurts Growth

Year to date, Seagate has underperformed the S&P 500 Index. The stock has returned 3.3% as compared with the Index’s gain of 10.7%.



The dismal performance can be attributed to intensifying competition in the market post the merger of Western Digital (WDC - Free Report) and SanDisk. Western Digital recently revised fourth-quarter estimates upwards driven by better-than-expected demand for its storage products (flash-based storage devices). This also doesn’t bode well for Seagate’s to-be-reported quarter results.

Moreover, shift in demand from PCs to inexpensive mobile devices is hurting growth of Seagate, which is primarily a hard disk drive (HDD) manufacturer.

Further, declining demand in the PC market as evident from Gartner and IDC’s recently released worldwide PC shipments data is a major concern for Seagate.
 

Seagate Technology PLC Price and EPS Surprise

 

Seagate Technology PLC Price and EPS Surprise | Seagate Technology PLC Quote

Additionally, we also believe that Seagate’s significant investments in HAMR technology, 10 and 12 terabyte Helium HDD and fourth generation SMR technology will take some more time to translate into credible top-line growth.

Stocks to Consider

Here are some companies you may consider as our proven model shows they have the right combination of elements to post an earnings beat this quarter:

Cypress Semiconductor with an Earnings ESP of +11.11% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lam Research (LRCX - Free Report) with an Earnings ESP of +1.31% and a Zacks Rank #1.

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Western Digital Corporation (WDC) - free report >>

Seagate Technology Holdings PLC (STX) - free report >>

Lam Research Corporation (LRCX) - free report >>

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